Evaluation Methods

Evaluation Methods

 

The supplier evaluation process can be informal or highly structured and formalized depending on the nature of the acquisition.

 

  • Informal and Semiformal Evaluation and Rating – includes assessments of the supplier by internal users and others anywhere in the buying organization where supplier contact takes place.  “How are things going with supplier X?” is a typical question that can and should be asked by procurement personnel when in contact with others in their own organization.  Similarly, information gleaned from conversations at professional meetings, conferences, and form the media can be useful in checking out and comparing such personal impressions.

 

  • Executive Roundtable Discussions – usually there is an annual meeting between top executive of the buyer and top executives of the supplier.  The Chief Supply Officer (CSO) takes the lead in discussions.  These roundtable discussions can help cement relationships between  the two organizations at a high level, and when repeated over time can provide invaluable information for both sides.

 

 

  • Formal Supplier Evaluation and Rating – Most formal supplier rating approaches attempt to track actual performance over time.  Advances in supply process software allow for easier tracking on a real time basis and greater performance visibility.  It is normal to track a supplier’s quality performance closely and in sufficient detail to pinpoint corrective action.  Quantifying an evaluation or assessment is often preferred because it signifies an attempt to remove subjectivity from the process. 

 

  • Weighted Point Evaluation Systems – Many organizations rate suppliers by assigning points and scales to each factor and each rating.  Where several sources supply the same goods or services, such schemes permit cross-comparisons.  Outstanding performance of a supplier can then be rewarded with additional business, while poor performance may result in the development and implementation of a performance improvement plan, or lead to less business with the supplier, or possibly dropping the supplier altogether.  Several issues are of concern with weighted point evaluation systems.  The typical process for developing a weighted point evaluation system is to: 91) identify the factors or criteria for evaluation; (2) determine the importance of each factor; and (3) establish a system for rating each supplier on each factor.  The relevant factors or decision criteria should be determined in the context of the purchase and the sourcing strategy for the item.  Most organizations track major suppliers more closely than sources that have less of an impact on the organization.  The selection of the factors, weights, and form of measurement will require considerable though to ensure congruence between the organization’s priorities for a product class and the rating scheme’s ability to identify superior suppliers correctly.  For different product classes, different factors, weights, and measures should be used to reflect  the varying impact on the organization.